Pilot Flying J Competitors Look Again to FTC

Published in CSP Daily News

Eighth lawsuit filed over alleged fuel rebate scheme

KNOXVILLE, Tenn. -- Mississippi trucker Mike Campbell and 10 others have filed a class-action lawsuit against Pilot Flying J Inc., reported The Tennessean. The new suit, filed Friday in Jackson, Miss., charges that Pilot Flying J secretly reduced rebates that Pilot sales executives had promised to Campbell, a Pilot customer since Jan. 1, 2005.

Meanwhile, competitors are hoping the Federal Trade Commission (FTC) takes a new look at the company.

Campbell's suit, like seven others filed in state and federal courts, bases the charges on an affidavit filed in U.S. District Court in Knoxville following an April 15 raid on Pilot Flying J's Knoxville, Tenn., headquarters by FBI and IRS agents.

The affidavit, which was attached to Campbell's suit, quotes from the transcripts of secretly taped meetings of Pilot sales executives in which they discussed the scheme to secretly reduce the rebates promised to truckers who they thought would not notice.

"Defendants knowingly engaged in the deceptive practices, which constitute unfair and deceptive conduct in trade or commerce," the complaint said.

The suit charges that the amount owed to the truckers exceeds $5 million.

Meanwhile, competitors say they can't compete with the lower diesel fuel prices charged by the nation's largest chain. When Pilot moved to buy out its largest truckstop rival four years a ago, a group of independent operators and their supplier asked the FTC, unsuccessfully, to block the deal, said the Tennessean.

The FTC in November 2010 approved a final order settling charges that Pilot's takeover of the travel center business of rival Flying J Inc. would have been anticompetitive and would have reduced competition in markets for diesel sold to certain long-haul trucking fleets. It required Pilot to sell 26 of its travel center locations to Oklahoma City-based Love's Travel Stops & Country Stores Inc.

Some of those operators are now holding out hope the FTC will reopen the case, said the report.

Jan Van Westrop, who runs The Tennessean, a travel center in Cornersville, Tenn., said that while he can compete with Pilot on food and other goods, Pilot, the largest buyer of diesel fuel in the country, is too big for him to be able to compete with on diesel. "I have to charge eight cents more a gallon than Pilot just to break even," he told the Tennessean.

Yash Singh at the Super Truck & Travel in Cookeville, Tenn., another independent, told the newspaper, "There's no way we can compete."

Singh and other independents cited a number of factors that give Pilot an edge, including the rebates.

Tom Ingram, spokesperson for Pilot, told the paper, "Pilot Flying J respects its competitors, but is extremely proud of their growth over recent years, which allows them to provide better service on a day-to-day basis to America's trucking companies and their drivers."

And Pilot's edge is not limited to diesel fuel and the rebate program, said the report. The Pilot purchase of Flying J has been followed by the continued expansion of Pilot's stake in the fuel card business. T-Chek, TCH and EFS, or Electronic Funds Source, are all now affiliated with Pilot Flying J.

Only Brentwood-based Comdata has a bigger share of the fuel card market, the report said. And Comdata doesn't own a nationwide chain of truckstops.

The advantage Pilot has had since the merger has been noted by one of Pilot's chief competitors, TravelCenters of America. "We are unable to determine the full extent and effect the combined Pilot Flying J may have on our financial position, results of operations or competitive position, although we expect the combination may significantly alter the competitive conditions in the travel center industry," TravelCenters stated in a recent filing with the Securities &d Exchange Commission (SEC).

In another filing, TravelCenters pointed directly to the threat from fuel cards. "Most of our trucking customers transact business with us by use of fuel cards, which are issued by third-party fuel card companies. The fuel card industry has only a few significant participants. Competition, or lack thereof, among fuel card companies may result in future increases in our transaction fee expenses or working capital requirements or both," the filing said.

Click here to read the full Tennessean report.